Against a backdrop of experiencing low rates for a long period of time, the aviation market is well suited for alternative risk transfer solutions such as captive insurance.
This is according to Alex Gedge, business development and captives executive at JLT Group, who suggested the aviation business – with its zero tolerance to safety violations and potential fluctuations of market premiums - could benefit from such solutions.
"Where the aviation market has been experiencing low rates for a long time, taking dependency out of the market can smooth the increases many aviation brokers are anticipating. This can be particularly valuable where there is uncertainty over airfares as it can add more certainty to your insurance spending," said Gedge.
Gedge suggested that captives may be able to step in where there is less appetite in the traditional insurance market, for example with new technologies such as unmanned air vehicles (UAVs).
"This gives a chance to build up data, and a loss record, without exposing your balance sheet to unnecessary risk," she explained.
There are also benefits to be made to an aviation company's bottom line.
"Cancellation cover, baggage insurance, travel insurance can generate huge profits for airlines, with claims that some budget airlines make as much as GBP 2.6 billion in add-ons," said Gedge.
"By utilising a captive to offer insurance to customers, they can benefit from insurance, and companies can diversify their captives as well as generate some additional income."
One of the largest benefits in Gedge's eyes, however, is the data that gives a more accurate picture of where claims are coming from.
Captives could also play a role in an aviation company's employee benefit programmes, cutting the time and expenses involved through multinational pooling.
"The idea of self-retaining risk is not new, and with the sector’s strong stance on safety monitoring and risk management data, it is in a strong position to benefit from captive insurance," Gedge concluded.
JLT’s aviation team provides insurance broking services to all areas of the aviation industry including airlines, aerospace infrastructure, general aviation and space.
JLT Group, Alex Gedge, Aviation, Captive Insurance, UAVs, Global